We make software for one reason, to do more with less. The only way blockchain software is useful is if it makes goods and services cheaper, faster, and better. Good software does 1 or 2 of these things. Great software does all 3. The value of the software comes from a combination of how many people or businesses use it, and for what purpose. I’ve seen Software that runs a hospital be worth a billion dollars. I’ve seen software used by 100’s of millions be worth a billion dollars.
In my experience, the software that automates away a persons job is the most hated. The larger the number of people affected, the more it’s hated. The largest industries, Healthcare, Government, Law, Finance, and Education have the least software. These are the largest parts of our economy, the rewards for software innovation are huge.
I’ve seen it 3 times now in my life. Every so often a new technology comes around that some people go crazy with. After the flood of people and experiments are over, we get useful, valuable things. The flood needs to happen. A giant wave of information, people, experimentation, speculation, trial and error. This is the natural flow of progress.
What most get wrong is thinking the technology matters more than the product or service. It doesn’t. Making something that people want is all that matters. Businesses buy software for outcomes. It took me 10 years of building software for businesses to learn that fact. I helped 100’s of businesses pick software. Businesses pick software they believe helps achieve their desired outcomes, that’s it. Every business doesn’t want a Shopify store, they want a way to sell their products to people and make a profit. The parameters to make that happen is how you check the softwares usefulness.
Blockchain technology is no different. It’s usefulness to society, will be to do more with less. If it doesn’t do that, it’s not useful.
Opensource software is everywhere — making a profit on it is rare. Linux is on almost every computer in the world, it captures little of this value. BIND (Berkley Internet Name Domain) powers all DNS, our internet doesn’t work with it. It captures little value. Building public goods is a noble cause, one that I am thankful people choose to do. Blockchains, L1s and L2s are open source projects, with new way to capture value. Not enough time has passed to be sure this new way will work. 99% of the value of open source software accrues to the businesses that build products on top of it.
Businesses will be the largest users of blockchain based software. 40% of the worlds GDP comes from businesses. If they don’t use blockchain technology, nobody will. They are the providers of all goods and services. How much a business uses software is a scale, some use it more than others. Software is only valuable to a business if it grows sales, reduces cost, or increases quality. If it doesn’t do one of these things, it’s worthless. I’ve only seen a handful of blockchain software that 1 or 2 of theses to date.
Consumers will use Blockchain technology en-mass — they likely won’t know or care. I built 100 eCommerce websites. Everyday consumers shop online. They don’t care if it’s a Shopify or Magento website. They care about the product or service they are buying — it’s quality, utility, and status. I wouldn’t bet that people will ever want things slower, more expensive or harder to use. Consumers will not make purchasing decisions based on the software used. Zero people care what payment provider the store uses. 99% of businesses care what bank or cc you use. This is why people will not care if it’s a blockchain powering their purchases.
Ownership matters, most people are fine with access. People love to own many non productive things. Most high value things like this are for Status, Reputation, and Merit. A Gucci handbag, a piece of Art, a luxury Automobile. There is no science to understand this part of our society. Property rights — owning a home, a business, and land — are the greatest catalyst too well being for any country. A lot of people also like to rent access over owning things. The success of Netflix, Uber, Spotify, Kindle, are all examples of this. Ownership comes with a lot of work, it’s not always desirable. If owning it is more hassle then the value, it will not work.
Removing unnecessary steps to outcomes is reducing waste. At no point does anyone ever say “i’m so glad that extra step and cost exist” in this process. Manufacturers hate extra steps. People hate middle men, you know the businesses that you always wonder how they exist. Those real-estate agents, approvers of shit, Inspectors of stuff. Marketplaces like Amazon, Etsy, and Pinterest removed so many middle men. This is why removing middle men is a great use of software. It does more with less. Blockchain software has the ability to remove a lot of waste from certain processes, but not all.
Adding financial incentives is a powerful tool — it’s harder to find product market fit. If the service is free people will abuse it, they need skin in the game. No one finishes a free course, why?, because they don’t loose. No one starts a free business. Some services should be basic human rights — food, water, health care, protection. Most things of value should cost money. People should have to work and contribute to get the things the need and want. Owning an asset is a great motivator than receiving a wage. Offering free ownership over software to get users makes it hard to find product market fit. Usage of your product becomes convoluted — you are not sure if you have users of a good software, or speculators.
Blockchains are a better foundation for some parts of finance — everyone will oppose it. Everything fancy and complicated about finance is a built on borrowing and lending. Producers of goods and services — food, clothing, shelter, and health care — are the borrowers. Lenders only get paid back if the borrower can make a profit. Increasing access too, velocity of, and qty of loans is a net good thing for a society. Most DeFi platform to date have focused on lending to traders and speculators. Without productive borrowers, no DeFi protocol will last. If you currently make a living by lending to businesses, you will oppose DeFi with your life force. If you buy, sell, or help in any way to produce derivative services built on top of this, you will hate DeFi. The sad reality, our economy now is greater than 50% financial services. Creating software to remove this excess wasted capital and resources is very valuable.
There is power in distributed systems — decentralization is a spectrum not a rule. Spreading out data, compute, and other important information is smart. Don’t put all your eggs in one basket, duh. I do it in my life with my finances, it’s called diversification. Diversification lowers risk of failure. All businesses that house data do this now. Almost everything good in my life has come from a company. Companies that have created tremendous value in my life get rewarded. Companies like Amazon, Apple, Walmart, Ikea, Costco, AT&T, Google, are wonderful. I revere them, and scrutinize them at the same time. The value they provide to humans is immense. Decentralized teams allow companies to operate better than large monolithic teams. Decentralizing vision & mission for a company is a sure fire way to stall progress. Few things that matter in my life can have their logic decentralized. Law and language are the best examples. Trusting leaders is not always bad, but can be. Plenty of experiments are being run with novel organization structures. Some will succeed, many will fail. What you want is the decentralized centre. Rule of law is great, protection from harm is wonderful. We should not want to get rid of that. There are more places where you should not use a blockchain, then are, currently.
Data is only valuable at scale — people will take risk, if they can earn money. I see this argument all the time “facebook makes billions with your data”. Pro tip, it would be only about $5 per person. Facebooks ability to make profit, comes from their scale. Your data alone, is not valuable at all, it must combined with other peoples data. Why?, because that is where the insights are valuable to businesses. Your data alone is just not that valuable. Along the same train of thought is the conversation “ why would anyone want to do own their data”. The answer most claim is that you can profit. Right now this isn’t true, as there is no ability to monetize it. Is not there. I saw this with cloud computing. If owning your data is going to be valuable, it will be when and if a person can profit off “owning” that data. Profit means, save money, earn money, or get something of value.
People care about privacy, not in the ways you think. Don’t talk to strangers — but post all your thoughts on twitter. Don’t share private photos — but post everything you do on instagram. Don’t share intimate moments — but post detailed thoughts on facebook. Don’t get into a car with strangers — but share an uber with anyone. The list goes on. The actual hilarious contradiction of most privacy arguments is laughable. Financial transactions, medical records, and sexual discretions. These seem to be the only buckets of information that people care is private and secure.
I’ve concluded that i’m neither a skeptic or a maximalist.
It is clear to me now that few ways of using this software are valuable at the present time. 99% of the trends and benefits listed by twitter influencers are not what people buy. They are technical characteristics. The potential to do more with less is large given the industries this software can disrupt. The path is long, dangerous, and difficult. We should try and run all of these experiments, for if they succeed, the benefits to our world will be once in a generation large.
This essay was also published on medium here